Why NGER and GHG Protocol aren’t enough for AASB S2 compliance

With the introduction of mandatory climate-related disclosures under AASB S2 Climate-related Disclosure (AASB S2) from 1 January 2025, Australian businesses face a significant shift in how they measure and report greenhouse gas (GHG) emissions. Many businesses already reporting under the National Greenhouse and Energy Reporting (NGER) Scheme or the GHG Protocol may assume they’re prepared, but the reality is more complex.

AASB S2 demands a broader, deeper, and more integrated approach to emissions reporting. This article explores the key differences between the three frameworks and outlines the uplift required to transition from NGER or GHG Protocol to full compliance with AASB S2.

The NGER Scheme: A policy tool, not a corporate reporting framework

The NGER scheme, administered by the Clean Energy Regulator, was designed to support national policy, not investor-grade disclosures. Its facility-level focus and threshold-based reporting mean that many emissions may go unreported if they fall below regulatory limits. While it provides consistency for large emitters to report emissions data for public policy purposes, it lacks the granularity and corporate-level alignment required under AASB S2.

The GHG Protocol: More comprehensive but still voluntary

The GHG Protocol offers a more comprehensive approach, including Scope 3 emissions and a full value chain perspective. However, its voluntary nature and allowance for optionality - such as the “minimum boundary” concept - mean that businesses can tailor their reporting, potentially omitting material emissions. This flexibility, while useful for internal benchmarking, does not meet the mandatory and prescriptive requirements of AASB S2.

AASB S2 Climate-related Disclosure: Mandatory, aligned and investor-focussed

AASB S2 represents a significant shift in climate-related reporting, moving beyond voluntary standards to a mandatory framework aligned with financial reporting. It is not a measurement framework; it’s a reporting standard that sets out how entities must disclose their greenhouse gas emissions in a way that is consistent, comprehensive, and useful for investors.

Unlike the NGER Scheme or GHG Protocol, AASB S2 requires entities to align their climate-related disclosures, including measurement of their GHG emissions, with their financial reporting boundary. Where differences exist, these must be clearly disclosed. This ensures that GHG emissions data reflects the full scope of the entity’s operations, not just selected facilities or activities.

AASB S2 also mandates the use of the GHG Protocol as the foundational measurement framework. However, it allows for the use of jurisdictional measurement methodologies (such as NGER) only where these are legally required, and even then, only to the extent that these are applied to measurement itself.

Even when applying the GHG Protocol, entities must do so to the extent that the Protocol does not conflict with AASB S2’s requirements. In practice, this means that the optionality that is available under the GHG Protocol (e.g. downstream Scope 3 emissions) is no longer available when preparing your mandatory sustainability report.

Importantly, AASB S2 addresses a common gap: jurisdictional frameworks often require reporting for only part of an entity or for limited scopes (e.g., Scope 1 and 2 only). AASB S2 makes clear that this does not exempt entities from disclosing Scope 1, 2, and 3 emissions for the entity as a whole.

Finally, while AASB S2 allows for the application of materiality, this is not only based on quantitative thresholds. Instead, it requires entities to consider the entire value chain, both upstream and downstream, and also apply a qualitative lens to consider what information is material to investors.

The uplift required and what businesses need to do

For businesses currently reporting under the NGER Scheme, the first step is recognising its limitations. Transitioning to the GHG Protocol requires a shift in mindset, from facility-level compliance to corporate-level accountability. This includes removing thresholds and measuring all upstream Scope 3 GHG emissions, while potentially restricting the calculations to the minimum boundaries.

But even the GHG Protocol falls short of AASB S2’s requirements. Under the new mandatory standard, optionality is no longer acceptable. Therefore, all downstream Scope 3 emissions should be measured and entities have to measure all Scope 3 categories above and beyond the minimum boundaries outlined in the GHG Protocol. It‘s important to note that financial materiality outlined in AASB S2 isn’t just about size; it’s about relevance to stakeholders too.

The following steps outline how businesses can navigate this transition effectively.

From NGER to GHG Protocol

1. Remove thresholds: All GHG emissions must be measured, not just those above NGER limits.
2. Expand to include all activities: Shift from facility-level to corporate-level reporting.
3. Include upstream Scope 3: Begin accounting for indirect emissions across your value chain. However, can use minimum boundaries outlined in the GHG Protocol.

From GHG Protocol to AASB S2

1. Eliminate optionality: Downstream Scope 3 and other GHG emissions reporting is no longer optional.
2. Eliminate use of minimum boundaries: Measure all Scope 3 emissions without use of only minimum boundaries.
3. Disclose differences: Any divergence between financial reporting and GHG boundaries must be explained.

Do you need help?

If you’ve been relying on NGER or the GHG Protocol to calculate your carbon footprint, it’s time to reconsider. AASB S2 introduces new expectations that go beyond these frameworks. Our sustainability reporting experts can partner with you to uplift your scope, boundary and disclosure practices, ensuring you’re not just compliant but future-ready.